Updated from 5:14 p.m. EST
Bountiful sales allowed
to deliver a robust bottom line in its fiscal first quarter, the natural grocery chain announced after the close Wednesday.
Whole Foods shares closed regular trading up $1.18, or 1.6%, to $73.30, and hit a 52-week high of $73.73 intraday. After the bell, Whole Foods shares were recently off $1.80, or 2.5%, to $71.50.
The Austin, Texas-based retailer earned $60.31 million, or 60 cents a share, on $1.12 billion in sales in its 16-week quarter ended Jan. 18. The company's per-share profits were up 43% from the year-ago period, while revenue was up 21%.
Those results exceeded both Wall Street's expectations and the company's own projections. Analysts surveyed by Thomson One Analytics were expecting the company to earn 57 cents a share on $1.09 billion in sales. The company previously predicted profits of 56 cents to 58 cents a share.
"Those are astounding numbers," said Mark Hugh Sam, an analyst who covers the company for Morningstar. Hugh Sam had projected much slower sales and earnings growth for the retailer in the quarter. (Morningstar does not do investment banking and its analysts do not hold shares in the companies they cover.)
Still, not everyone was impressed, as the company's after-the-bell decline indicates. But Whole Food's valuation may have something to do with that. The company is trading at about 37 times its projected fiscal 2004 earnings, which is relatively pricey for a retailer.
In its fiscal second quarter, Whole Foods expects to earn 47 cents to 50 cents a share. For the full year, the company raised its earnings guidance to a range of $1.93 to $2.02 per share, from $1.88 to $1.96.
Analysts had projected the company would earn 48 cents a share on $832.47 million in revenue in the second quarter. Analysts were looking for earnings of $1.97 a share on $3.66 billion in sales for the full year.
Whole Food's quarterly results were driven by strong sales in its older stores. The company's same-store sales, which compares results at outlets open for more than one year, increased 14.7%.
As company officials
projected at the end of last quarter, the retailer benefited from the ongoing
grocery strike in Southern California. The strike has driven customers away from traditional, unionized grocery chains such as
that have been affected by the strike, and into
alternate venues such as
, in addition to Whole Foods.
Some 19 Whole Foods stores in the Southern California area saw increased sales as a result of the strike, the company said in a statement. Sans those stores, Whole Foods' comparable-store sales would have increased 12.8% in the quarter.
Company CEO John Mackey warned investors and analysts on a conference call that the company's strong sales growth will likely taper off somewhat once the strike ends. Still, Whole Foods expects to see some long-term benefits from the strike, he said. As the strike continues, customers will change their shopping habits and come to expect the service and quality Whole Foods offers, he said.
"There's permanent damage occurring in
affected by the strike," Mackey said. "The longer this goes on, the deeper the damage will be and the better it will be for Whole Foods in long term."
In addition to the strike and the company's overall sales growth, Whole Food's bottom line also benefited from cost controls. The company's gross profit margin, for instance, increased 39 basis points to 34.44% of sales.
Gross margin represents the difference between what a company charges customers for its goods and services and its supplier costs and other direct sales expenses. The company attributed its improving gross margin in part to reduced occupancy costs as a portion of sales.
But the company also saw a reduction in its operating costs as a portion of sales. The company's direct store expenses, for instance, fell 7 basis points to 25.21% of sales. Meanwhile, general and administrative expenses dropped 16 basis points to 3.21% of sales.
Whole Foods expects to open about 14 stores this fiscal year. The company has 41 stores, or 1.9 million square feet, in development. Currently, Whole Foods operates 154 stores in the U.S., Canada and the U.K.